Limewire is suing the record labels, accusing them of collusion to create a monopoly over the digital distribution of copyrighted music.

The suit, filed Monday in the US District Court for the Southern District of New York, follows the closing of most of the popular file-sharing websites due to lawsuits initiated by record companies. It also comes on the heels of a suit filed by 13 record companies against Limewire, accusing the developer of music piracy and demanding damages that could amount to $476 million.

Limewire now charges the record companies with colluding to create a monopoly over the digital distribution of copyrighted music. The record companies "have engaged in these unfair business practices for the specific purpose of eliminating sources of decentralised peer-to-peer file sharing and acquiring a monopoly over digital distribution of commercially valuable copyrighted music and movie content", the lawsuit reads.

The alleged unfair business practices include collusion among the record companies to price their licensing rates such that independent music sellers can't afford to stay in business, Limewire said.

Limewire added that a since-changed policy at the record companies of requiring licensees to negotiate only with certain companies that represent a group of record labels resulted in artificially high licensing fees.

Limewire also charges the record companies with trying to extend their monopoly by forcing music distributors to work only with their affiliated filtering system supplier. Limewire says it developed a filtering application to prevent illegal downloading and encourage legal content purchasing. But the record companies refused to give the developer access to the metadata that uniquely identifies each song in order for the filtering system to work, Limewire claims.

Instead, Limewire alleges the record companies encouraged Limewire to use their preferred supplier for a P-to-P filtering system, iMesh. While Limewire concedes that iMesh is not owned by the record companies, it alleges the supplier is controlled by the record companies. A top executive at iMesh is a former leader of the Recording Industry Association of America (RIAA) and iMesh is the only RIAA-sanctioned business of its kind in the US, according to Limewire.

The suit follows some high profile settlements by other leading P-to-P networks. In July, Kazaa agreed to pay at least $100 million to four record companies and an additional amount to motion picture companies to settle lawsuits. Earlier this month, eDonkey agreed to pay $30 million to settle similar suits.

EDonkey's founder last year predicted that all US P-to-P companies would cease to exist because they wouldn't have the resources to defend themselves against the record companies after a Supreme Court ruling against Grokster. That ruling vaguely said that P-to-P software developers may be liable for illegal use of the software.